The Louisiana Road Home Program: Federal Aid for State Disaster Housing Assistance Programs
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1 : Federal Aid for State Disaster Housing Assistance Programs Natalie Keegan Analyst in American Federalism and Emergency Management Policy July 31, 2009 Congressional Research Service CRS Report for Congress Prepared for Members and Committees of Congress RL34410
2 Summary The devastation resulting from Hurricane Katrina created an unprecedented housing crisis in the Gulf Coast region. In response to this need, Congress appropriated funds to address disasterrelated housing needs in the coastal states. At the state level, Louisiana developed a homeowner s assistance program (HAP) under its Road Home recovery initiative. One source of funding for the Road Home program is the Community Development Block Grant (CDBG) program administered by the Department of Housing and Urban Development (HUD). Since December 2005, Congress has appropriated $19.85 billion for the Community Development Block Grant program, of which $13.41 billion went to the state of Louisiana to help with housing recovery in the state. CDBG appropriations currently provide the core funding for the Road Home program. Additional funding from the Hazard Mitigation Grant Program (HMGP), administered by the Federal Emergency Management Agency (FEMA), is being sought by Louisiana to supplement the CDBG funds in order to expand the housing assistance in Louisiana. As part of the American Recovery and Reinvestment Act of 2009 (P.L ), the 111 th Congress expanded the use of HMGP funds for damage caused by Hurricanes Katrina and Rita by prohibiting the FEMA Administrator from restricting the use of HMGP funds for eligible homeowners who began the mitigation activity prior to receiving written approval from FEMA. Congress may also wish to consider the use of HMGP funds for state housing assistance programs such as the Road Home program. Issues other than funding that Congress may wish to consider include the waiver of HMGP regulatory provisions, federal agency information sharing, redundancy of disaster inspections, standardization of program cost projections, and cost and availability of hazard insurance. This report will be updated as events warrant. Congressional Research Service
3 Contents Introduction...1 Louisiana Homeowners Assistance Program...2 Program Eligibility...2 Covenants Required to Receive Assistance...2 Insurance Penalty Deduction...3 Program Assistance Amounts...3 Funding for the Road Home Program...4 Projecting Program Funding Levels...6 Program Funding Projection Differentials and Use of Data...7 Program Status...9 Issues of Potential Congressional Interest...9 Use of HMGP Funds...9 State Sovereignty in Disasters...12 Redundancy of Disaster Inspections...12 Standardizing Cost Projection Methodologies...12 Cost and Availability of Hazard Insurance...12 Concluding Observations...12 Tables Table 1. Louisiana Allocation of CDBG Disaster Relief Assistance, Hurricanes Katrina and Rita...5 Table 2. Estimation of Program Costs Based on Number of Households Eligible for the Road Home Homeowners Assistance Program...8 Contacts Author Contact Information...13 Congressional Research Service
4 Introduction On August 29, 2005, Hurricane Katrina made landfall in Louisiana, affected an area of 90,000 square miles, caused an estimated 1,577 deaths, and damaged or destroyed over 300,000 homes in the coastal region. 1 On September 24, 2005, Hurricane Rita made landfall and caused additional damage to areas affected by Hurricane Katrina. The devastation created an unprecedented housing crisis, especially in Louisiana. Subsequently, both Congress and the state of Louisiana took action to begin recovery from the devastation of Hurricanes Katrina and Rita. Since December 2005, Congress appropriated $19.8 billion for the Community Development Block Grant program (CDBG), of which $13.4 billion went to the state of Louisiana to help with housing recovery in the state. 2 To address housing issues of displaced residents, the state of Louisiana developed a disasterrelated housing program known as the Road Home. The Road Home housing program consists of four components that address the Hurricane Katrina-related housing needs: the Louisiana Homeowners Assistance Program (HAP); the Workforce and Affordable Rental Housing Program; the Restoration of Homeless Supports and Housing Program; and the Developer Incentives Program. 3 The HAP component of the Road Home program uses the largest portion of the Road Home funding and provides the mechanism for distributing assistance to homeowners in Louisiana to repair or replace their homes. 4 Currently, CDBG funds provide the core funding for the Road Home program, but additional funding is being sought by Louisiana to supplement the CDBG funds in order to expand the HAP component. This report discusses funding for the Road Home program and related activities. Before focusing on funding issues, the report summarizes the HAP component of the Road Home program, which is the program s largest and most controversial element. 1 U.S. Congress, Senate Committee on Homeland Security and Governmental Affairs, Hurricane Katrina: A Nation Still Unprepared, special report, 109 th Cong., 2 nd sess., S.Rept (Washington: GPO, 2007), p P.L , 119 Stat. 2779, Defense Appropriations Act for FY2006; P.L , 120 Stat. 472, Emergency Supplemental Appropriations Act for Defense, the Global War on Terror, and Hurricane Recovery Act of 2006; P.L , 121 Stat. 1343, Department of Defense Appropriations Act, Louisiana Recovery Authority, The Road Home Housing Programs Action Plan Amendment for Disaster Recovery Funds (Louisiana: 2006). The Workforce and Affordable Rental Housing Program includes a low-income housing tax credit piggyback program, services funding for supportive housing, flexible incentives for mixed income development, and the small rental property repair program. The Restoration of Homeless Supports and Housing program addresses the increased risks and demands related to homelessness. The Developer Incentives program includes a housing development loan fund, land assembly operations, support for faith-based and community-based housing recovery programs, and funding of building code enforcement by local governments. 4 This report solely addresses HAP because that program primarily operates with federal funding and is the focus of congressional scrutiny. While HAP is one component of the Road Home housing program, it is sometimes referred to as the Road Home program in discussions that address only the homeowners assistance element of the program. For the purposes of this report, the Road Home program refers to all four components of the program and HAP refers only to the homeowners assistance component. Congressional Research Service 1
5 Louisiana Homeowners Assistance Program Louisiana residents whose homes were damaged by Hurricanes Katrina or Rita may be eligible for the Louisiana HAP administered by the Louisiana Recovery Authority. Program funds help eligible owners or occupants repair, rebuild, buy, or sell damaged properties. Program Eligibility To be eligible, owners in Louisiana must meet the following conditions: the damaged home must be located in one of the 37 parishes designated in the Homeowner Program policies document; 5 the owner must be able to prove that he or she owned and occupied the property as a primary residence prior to August 29, 2005 (for Hurricane Katrina related damages) or September 24, 2005 (for Hurricane Rita related damages); 6 the owner must be in a single-unit or double unit structure, town home, manufactured housing (mobile home) unit, or condominium; and, 7 the property must have sustained at least $5,200 in damage from Hurricanes Katrina or Rita. 8 Covenants Required to Receive Assistance The Louisiana HAP program requires recipients of assistance to sign a legally binding covenant stating that they have complied or will comply with the following obligations within three years of the date of execution of the covenant. If the recipient fails to comply with the covenants, the recipient will be required to pay back the entire grant amount. The covenants state that: repairs made to the home occupied by a recipient must conform with the minimal local building codes in place at the time the repairs were made if such repairs were completed prior to execution of the covenant agreement; repairs made to the home occupied by a recipient must conform with the minimum standards set by the 2003 International Residential Building Code if such repairs were made after execution of the covenant agreement; 5 State of Louisiana, Office of Community Development, The Road Home Homeowner Program, (Louisiana, Nov. 6, 2008), p Ibid. 7 Ibid, p Ibid, p. 3. Louisiana Recovery Authority program guidelines originally required that the applicant register for FEMA Individual Assistance (42 U.S.C. 5174) and that the home be categorized by FEMA as having been destroyed or having suffered major damage. Homeowners approved by FEMA for $5,200 or more in FEMA home repair assistance or for a buyout had to meet one of these criteria. In response to concerns raised by program applicants, current program guidelines now provide that homeowners who did not meet these criteria because they did not qualify for FEMA assistance may appeal their eligibility for the HAP program. Homeowners who did not register with FEMA may be eligible based on the home evaluation and a determination by Road Home officials that the $5,200 damage threshold was met. Congressional Research Service 2
6 the home occupied by a recipient must comply with the base flood elevation requirement adopted by the local government; 9 the home must remain owner-occupied for at least three years from the date of execution of the award documents; residential hazard insurance must be maintained on the home occupied by a recipient; flood insurance must be maintained in perpetuity if the home is located in a flood zone; and claims for unpaid and outstanding insurance claims will be subrogated, or transferred, back to the program. 10 Insurance Penalty Deduction Unless a community opts out of participation in the National Flood Insurance Program (NFIP), homeowners residing in flood plains are required to carry flood insurance. There will be a 30% deduction in the compensation grant amount where flood hazard insurance was not carried by the homeowner prior to Hurricanes Katrina or Rita. 11 Program Assistance Amounts The maximum amount of assistance under Louisiana HAP is $150,000 per application. 12 The formula used to calculate the amount to be provided to grant recipients varies based upon the selected program option. Option 1: Stay in the home Under Option 1, the homeowner chooses to stay in the home and is provided compensation for repair or rebuilding costs. Option 1 is based on the lesser amount of: the uncompensated damage cost minus any other compensation the recipient has received for loss to the structure; or the uncompensated loss based upon the pre-storm value minus any other compensation the recipient received for loss to the structure, up to $150, A Base Flood Elevation (BFE) is the height or average depth of the base flood, usually in feet, above the ground surface. 10 State of Louisiana, Office of Community Development, The Road Home Homeowner Program, (Louisiana, Nov. 6, 2008), p Ibid. 12 Ibid, p Ibid. Congressional Research Service 3
7 Option 2: Relocate Under Option 2, the homeowner chooses to sell to the state of Louisiana and become an owneroccupant in another home in Louisiana. For homes that sustained damage totaling less than 51% of the pre-storm value. Compensation is based upon the lesser amount of: the uncompensated cost of damage minus any other compensation received on the loss to the structure; or the uncompensated loss based upon the pre-storm value minus any other compensation the recipient received for loss to the structure, up to $150, For homes that sustained damage equal to or greater than 51% of the pre-storm value. Compensation is the pre-storm value minus any other compensation the recipient received for loss to the structure, up to $150, Option 3: Sell Under Option 3, the homeowner chooses to sell to the state of Louisiana and move out of the state, or become a renter. For homes that sustained damage totaling less than 51% of the pre-storm value. Compensation is based upon the lesser amount of: the uncompensated cost of damage minus any other compensation received on the loss to the structure; or 60% of the pre-storm value minus any other compensation the recipient received for loss to the structure, up to $150, For homes that sustained damage equal to or greater than 51% of the pre-storm value. Unless the homeowner meets certain age requirements, compensation is 60% of the pre-storm value minus any other compensation the recipient received for loss to the structure, up to $150, Funding for the Road Home Program Congress has appropriated $19.8 billion in CDBG disaster assistance to be used for expenses related to disaster relief, long-term recovery, and the restoration of infrastructure in the states affected by Hurricanes Katrina, Rita, and Wilma. 18 As detailed in Table 1, Louisiana received 14 Ibid. 15 Ibid. 16 Ibid, p Ibid. By calculating the compensation amount based upon 60% of the pre-storm value for recipients that choose Option 3, recipients are incurring a 40% penalty for choosing to move out of the state of Louisiana. The 40% penalty is waived for recipients who were 65 years old or older as of December 31, For additional information on the Community Development Block Grant, see CRS Report RL33330, Community Development Block Grant Funds in Disaster Relief and Recovery, by Eugene Boyd and Oscar R. Gonzales. Congressional Research Service 4
8 $13.4 billion (68%) of the CDBG disaster assistance provided for Hurricanes Katrina, Rita, and Wilma. These funds may be used for a variety of disaster relief efforts, including the Road Home program. The broad language of the appropriations statutes provided Louisiana with some flexibility in determining the use of funds. Of the three public laws that appropriated CDBG disaster assistance, P.L ($6.2 billion) and P.L ($4.2 billion) appear to provide for a more general use of funds within the scope of disaster relief, long-term recovery, and the restoration of infrastructure. While the language within the statutes does not expressly appropriate funds to the Louisiana HAP, there is no statutory element that would prohibit the use of funds for the program. By comparison, P.L ($3.0 billion) provides more specific language that appropriates the funds solely for costs associated with the Road Home program. Louisiana designated only a portion of the first and second appropriations for the Road Home program. When combined with the third appropriation of $3.0 billion, Louisiana utilized approximately $10.5 billion in CDBG assistance for the Road Home program. 19 This is approximately 75% of the $13.4 billion available for the Road Home program. Table 1. Louisiana Allocation of CDBG Disaster Relief Assistance, Hurricanes Katrina and Rita Public Law Intended use of funds Louisiana Allocation P.L P.L P.L For necessary expenses related to disaster relief, long-term recovery, and restoration of infrastructure in the most impacted and distressed areas related to the consequences of hurricanes in the Gulf of Mexico in 2005 in States for which the President declared a major disaster... to remain available until expended. 20 (119 Stat. 2779) For necessary expenses related to disaster relief, long-term recovery, and restoration of infrastructure in the most impacted and distressed areas related to the consequences of Hurricanes Katrina, Rita, or Wilma... to remain available until expended. (120 Stat. 472) To remain available until expended... solely for the purpose of covering costs associated with otherwise uncompensated but eligible claims that were filed on or before July 31, 2007, under the Road Home program administered by the State in accordance with plans approved by the Secretary (of HUD). (121 Stat. 1343). $6,210,000,000 a $4,200,000,000 b $3,000,000,000 Total $13,410,000,000 Source: U.S. Department of Housing and Urban Development, Federal Register, Oct. 30, 2006, vol. 71, no. 209, p ; U.S. Department of Housing and Urban Development, Federal Register, February 13, 2006, vol. 71, no. 29, p. 7666; U.S. Department of Housing and Urban Development, Federal Register, Dec. 11, 2007, vol. 72, no. 237, pp a. P.L provides that no state shall receive more than 54% of the appropriated amount (which was $11.5 billion). Louisiana received the maximum amount. b. P.L provides that no state shall receive more than $4.2 billion. Louisiana received the maximum amount. 19 U.S. Department of Housing and Urban Development, Performance and Accountability Report: FY2008 (Washington: GPO, 2008), p The Road Home program falls under the long-term recovery component of the intended use of funds. Congressional Research Service 5
9 Currently, CDBG provides the core funding for the Road Home program. However, congressional efforts are being made to expand the Louisiana HAP through federal funding that would supplement CDBG funding, notably, the Hazard Mitigation Grant Program (HMGP), administered by FEMA. The purpose of the HMGP is to reduce the loss of life and damage to property in future disasters through hazard mitigation activities by communities and homeowners. 21 Legislation introduced in the 110 th Congress, which is discussed later in this report, focused on the use of HMGP funding to expand the Louisiana HAP to provide additional funding for hazard mitigation activities. The 111 th Congress has enacted legislation that prevents the Administrator of FEMA from prohibiting or restricting the use of HMGP for homeowners who commenced hazard mitigation activities prior to application approval. 22 FEMA has estimated that Louisiana will be eligible for over $1.4 billion in HMGP funding under the major disaster declarations for Hurricanes Katrina and Rita. 23 Louisiana submitted an application for $1.2 billion in HMGP funding for the Road Home program that never received FEMA approval. 24 Projecting Program Funding Levels According to the Proposed Action Plan developed by then-governor Kathleen B. Blanco and the Louisiana Recovery Authority (LRA), the Louisiana Road Home program (which includes all four elements) was initially projected to be fully funded at $8.0 billion. 25 The Homeowner s Assistance Program (HAP) portion of the Road Home program was to be fully funded at $6.3 billion (approximately 78% of total Road Home funding). 26 It is unclear how the LRA arrived at this initial projection given that in 2006 the LRA projected the average award amount to be $70,000 and the number of eligible applications to 128,000, which would be an initial program cost of $8.9 billion (see Table 2). In addition to the $8.9 billion that would be needed to provide an average award amount for all projected eligible applicants, there would be an additional cost for program administration. Yet the LRA consistently under-projected the HAP budget when compared to projected program cost based upon average award amounts and number of eligible applicants, as detailed in Table 2. After reassessing the Road Home program in 2006, the LRA increased the projected program cost to $7.5 billion. 27 Since the LRA did not change the projected award amount or the number of eligible applicants until May 2007, it is unclear why they changed the program cost projection. Even with the increase, this amount was still lower then the $8.9 billion projection calculated from the average award amount and the number of eligible applicants. In 2007, the LRA further 21 For additional information on the Hazard Mitigation Grant Program, see CRS Report R40471, FEMA s Hazard Mitigation Grant Program: Overview and Issues, by Natalie Keegan. 22 P.L , 123 Stat Testimony of David I. Maurstad, Assistant Administrator Mitigation, Federal Emergency Management Agency, in the U.S. Congress, Senate Committee on Homeland Security and Governmental Affairs, Subcommittee on Disaster Recovery, The Road Home? An Examination of the Goals, Costs, Management and Impediments Facing Louisiana s Road Home Program, hearings, 110 th Cong., 1 st sess., May 24, 2007 (Washington: GPO, 2007). 24 Ibid. 25 Louisiana Recovery Authority, The Road Home Housing Programs Action Plan Amendment for Disaster Recovery Funds (Louisiana: 2006), p Ibid. 27 Louisiana Recovery Authority, The Road Home Housing Programs Action Plan Amendment for Disaster Recovery Funds (Louisiana: 2006), p. 3. Congressional Research Service 6
10 increased the projected program cost to $10.4 billion. 28 In May 2007, the LRA also increased the projected average award amount from $70,000 to $74,173 and increased the projected number of eligible applicants from 128,000 to 132,215, which would have resulted in a projected program cost of $9.8 billion. The projected program cost of $10.4 billion that the LRA presented in a Senate committee hearing did not align with the projected program cost of $9.8 billion based on the average award amount and the number of eligible applicants. 29 The LRA program cost projection of $10.4 billion may have included a program administration cost, but there would have been approximately $600 million (5.7%) remaining after awards were made to applications. In 2009, the LRA reassessed the program cost again, decreasing the average award amount to $62,605 and increasing the projected number of eligible applicants to 162,545, which would have resulted in a projected program cost of $10.2 billion. Based upon the LRA program cost projection of $10.4 billion, the adjustment to the projections for the average award amount and the number of eligible applicants would reduce the remaining funds to $23 million. As shown in Table 1 of this report, Louisiana has received $13.4 billion in federal funding that could be used to fund the Road Home program. If the program cost projection remains at $10.4 billion, the Road Home program is potentially fully funded. Program Funding Projection Differentials and Use of Data As shown in Table 2, there is a difference of approximately $1.2 billion between the 2006 LRA program cost projection of $8.9 billion and the 2009 program cost projection of $10.2 billion. Road Home officials have suggested that this difference is the result of changes in the data used to project program costs including an unexpectedly high number of applicants, the inclusion of wind damaged homes in the program, and a higher than anticipated average award amount. According to the LRA, the initial HAP program cost projection of $6.3 billion was based on the best available information on housing needs, housing costs, potential public funding, and the ability of the programs to leverage private resources. 30 Table 2 provides projections of the number of eligible applicants based on data developed by FEMA, the LRA, and ICF corporation (the contractor administering the Road Home program). Both the projected number of eligible applicants and the average award amount has, over the years, fluctuated, which affects the ability to accurately predict program cost. The projections used for the state s initial funding request are largely based on owner-occupied damage estimates for both insured and uninsured losses for flood and wind damage. 31 FEMA, the Small Business Administration (SBA), and the National Flood Insurance Program (NFIP) are identified as sources of data used to calculate program cost projections. Yet the projections for the number of eligible applicants fluctuated between FEMA s initial projection of 122,592 and the 28 Testimony of Andrew Kopplin, Executive Director of the Louisiana Recovery Authority, in the U.S. Congress, Senate Committee on Homeland Security and Governmental Affairs, Subcommittee on Disaster Recovery, The Road Home? An Examination of the Goals, Costs, Management and Impediments Facing Louisiana s Road Home Program, hearings, 110 th Cong., 1 st sess., May 24, 2007 (Washington: GPO, 2007). 29 Ibid. 30 Louisiana Recovery Authority, The Road Home Housing Programs Action Plan Amendment for Disaster Recovery Funds (Louisiana: 2006), p Ibid. Congressional Research Service 7
11 LRA s 2009 projection of 162,545. This fluctuation is one example of the challenge of predicting the cost of federal disaster assistance based on disaster data compilation. Disaster data compilation is often faced with constraints on time and funding. Variability in definitions, methodologies, sources, and data points also create inconsistencies among data sets. 32 For example, divergences in FEMA and LRA definitions may have resulted in different calculations concerning the number of eligible households for the Road Home program. Due to the increasing use of disaster data in projecting impacts and evaluating needs, Congress may wish to consider establishing a systematic method for collecting disaster information. Table 2. Estimation of Program Costs Based on Number of Households Eligible for the Road Home Homeowners Assistance Program Total Costs a Data Source Approx. Date of Projection Projected Number of Eligible Households Initial Projection Based on Average Award Amount of $70,000 May 2007 Projection Based on Average Award Amount of $74,173 Feb Actual ICF Costs Based on Average Award Amount of $62,605 Federal Emergency Management Agency: Inspections Data Federal Emergency Management Agency: Revised Inspections Data Louisiana Recovery Authority: CDBG Action Plan Louisiana Recovery Authority: ICF Eligible Applicants Projections Louisiana Recovery Authority: ICF Eligible Applicants Projections Initial Damage Assessment ,592 $8.5 billion $9.1 billion $7.6 billion Dec ,560 $8.4 billion $8.9 billion $7.5 billion Jan ,000 b $8.9 billion $9.5 billion $8.0 billion May ,215 $9.2 billion $9.8 billion $8.3 billion Feb ,545 $9.2 billion $9.8 billion $10.2 billion Source: Louisiana Recovery Authority, The Road Home Housing Programs Action Plan Amendment for Disaster Recovery Funds (Louisiana: 2006); Testimony of Andrew Kopplin, Executive Director Louisiana Recovery Authority, in the U.S. Congress, Senate Committee on Homeland Security and Governmental Affairs, Subcommittee on Disaster Recovery, The Road Home? An Examination of the Goals, Costs, Management and Impediments Facing Louisiana s Road Home Program, hearings, 110 th Congress, 1 st session, May 24, 2007 (Washington: GPO, 2007); Louisiana Recovery Authority, The Road Home Week 138 Situation and Pipeline Report (Louisiana: Feb. 23, 2009). a. The program cost data does not include any amounts associated with activities that would use HMGP funding. b. Louisiana initially stated that it would assume that it would serve 95% of the owner-occupied homes that FEMA determined to have major or severe damage. Based on Dec FEMA projections of 120,560, 32 United Nations Development Program, An Analytical Review of Selected Data Sets on Natural Disasters and Impacts (Belguim: March 2006), p. 5, at Congressional Research Service 8
12 114,532 households could be eligible. Despite this statement, in Jan. 2006, Louisiana chose to base their projections on 128,000 eligible households rather than 114,532. Program Status As of March 2009, the Road Home program had received 185,113 eligible applications for HAP, even though the LRA was projecting only 162, As of March 19, 2009, a total of $7.8 billion of the projected $10.2 billion in HAP awards had been disbursed. 34 Approximately 91% of homeowners receiving HAP assistance chose to stay in their homes, 7% chose to sell the home and relocate in Louisiana, and 2% chose to sell their home and move out of state or become a renter. 35 Issues of Potential Congressional Interest Several concerns and issues have been raised by Louisiana residents, some Members of Congress, the private sector, and public officials regarding the development and implementation of the Road Home program. Use of HMGP Funds The debate surrounding use of HMGP funds for the Road Home program provides a basis for discussion of broader issues related to federal funding for disaster housing assistance. These issues include waivers of federal statutes and regulations, bureaucratic discretion, and state sovereignty. There were several bills pending before the 110 th Congress that would have addressed the use of HMGP funds administered by FEMA. These bills included the following. S. 825 would have made HMGP funds available to Louisiana for use under the Road Home program pursuant to specified terms as approved by the Secretary of HUD under provisions of the Community Development Fund. S would have prohibited FEMA from restricting the use of HMGP funds for the Road Home program based on program requirements that limit the amount of funds for homeowners who do not agree to remain an owner and occupant of a home in Louisiana (certain limits are waived for individuals who were at least age 65 before the end of 2005). S would have provided flexibility in the use of $1.2 billion in HMGP funds for the Road Home program. Funds would have had to be used pursuant to guidelines established under the Supplemental Community Development Block Grant Program, regardless of requirements under the HMGP. S would have prohibited the FEMA Administrator from withholding HMGP funding based upon Road Home program requirements that limit funding based upon whether applicants remain homeowners and occupants in the state of Louisiana, or whether or not they are senior citizens. 33 Louisiana Recovery Authority, The Road Home Week 142 Situation and Pipeline Report (Louisiana: March 24, 2009), p Ibid, p Ibid, p. 2. Congressional Research Service 9
13 S would have authorized additional funds for the Road Home program, provided Louisiana committed at least $1 billion for the program. S would have provided for the use of HMGP funds by waiving regulatory requirements. H.R would have provided flexibility in the use of federal funds for the Road Home program. The legislation would have prohibited the FEMA Administrator from restricting the use of HMGP funds based upon any Road Home program provisions that limit or reduce the amount available to eligible homeowners who do not agree to remain an owner and occupant of a home in Louisiana. It would have also waived the applicability of any deduction or penalty for elderly homeowners. The 111 th Congress has enacted legislation that prevents the Administrator of FEMA from prohibiting or restricting the use of HMGP for homeowners who commenced hazard mitigation activities prior to application approval. 36 The 111 th Congress may also wish to consider the use of HMGP funds for state housing assistance programs such as the Road Home program. Waiving Statutory and Regulatory Provisions A potential precedent would have been established if the 110 th Congress had enacted legislation (such as S or S. 2445) that would have waived provisions of HMGP. Waiving provisions of the HMGP would potentially reduce effectiveness of the program to mitigate the impact of disasters. The hazard mitigation section of P.L (the Stafford Act) provides resources to the state to reduce the future risks from disasters. 37 Waiving statutory and regulatory provisions during disasters is often a tool used to expedite funding. While little is known about the long term implications of such waivers, many scholars believe that waivers and generous federal disaster assistance creates a disincentive for state and local governments and homeowners to undertake hazard mitigation measures. 38 Hazard mitigation activities are designed to reduce property damage, potential injuries, and loss of life from future disasters. Reducing the impact from disasters also reduces the level of federal disaster assistance that may be required. Congress may wish to consider evaluating the impact of federal waivers (other than cost-share waivers) in disasters by determining the number and type of waivers that have occurred in specific disasters and assessing the short and long term impact of the waivers. Changing Program Eligibility Criteria Congress may wish to consider the implications of using HMGP funds for a program designed to compensate individuals directly for disaster losses. The hazard mitigation program was developed to implement long term mitigation strategies to prevent future losses. 39 Historically, the 36 P.L , 123 Stat U.S.C. 5170c. 38 Rutherford Platt, Hazard Mitigation: Cornerstone or Grains of Sand, Natural Hazards Observer, vol. 20, (September 1996). 39 Testimony of David I. Maurstad, Assistant Administrator Mitigation, Federal Emergency Management Agency, in the U.S. Congress, Senate Committee on Homeland Security and Governmental Affairs, Subcommittee on Disaster (continued...) Congressional Research Service 10
14 implementation of federally funded mitigation activities relied upon the involvement of local jurisdictions in the coordination of mitigation projects such as buyouts. Should HMGP funding be made available to the Road Home program, the role of the local jurisdiction would be reduced significantly since the federal funding would be passed directly from the state to the individual homeowner. Bureaucratic Authority By substituting compliance with HUD regulations instead of FEMA regulations to address Road Home funding issues, proposed legislation in the 110 th Congress such as S. 825 and S raised questions regarding the level of authority held by the HUD Secretary and the FEMA Administrator. Replacing HMGP program requirements with HUD CDBG program requirements would be a shift in authority from the FEMA Administrator to the HUD Secretary. Role clarification and federal coordination in the provision of federal disaster assistance continues to be a disaster recovery challenge. Implementing disaster recovery measures often involves coordination between several federal, state, and local government agencies. The role of each agency is often determined by the location, scope, and nature of the disaster. Issues of bureaucratic authority will continue to arise in future disasters and will influence the type of coordination and disaster assistance that is needed. Congress may wish to consider evaluating the role of lead agencies for different disaster assistance responsibilities such as housing, infrastructure repair, and fiscal incentives to determine how those roles could change depending on the scope and nature of the disaster to improve federal coordination. Differing Disaster Recovery Philosophies and Objectives One of the struggles associated with HAP program funding is the effort to align two different recovery philosophies and two different program objectives in a single state government disaster housing assistance program. FEMA and HUD each exercise different responsibilities in community recovery. Each federal agency arguably implements policy under different recovery objectives. For example, HUD programs have traditionally been viewed as a tool to promote economic development. By comparison, FEMA programs generally fall under the auspices of short-term recovery needs and hazard mitigation and do not necessarily seek to make communities whole. The focus of most FEMA assistance is to provide for the immediate shelter needs of individuals and restore critical infrastructure such as power, water and sewage systems, and postal services. FEMA grant programs have traditionally been considered reimbursement programs in which individuals and communities are partially reimbursed for losses and damage to properties. HAP is essentially a compensation program in which the state is attempting to compensate individuals for damage to their property. Differing philosophies may have made it difficult for FEMA and HUD to attain shared or common program objectives. (...continued) Recovery, The Road Home? An Examination of the Goals, Costs, Management and Impediments Facing Louisiana s Road Home Program, hearings, 110 th Cong., 1 st sess., May 24, 2007 (Washington: GPO, 2007). Congressional Research Service 11
15 State Sovereignty in Disasters The Road Home program is a state housing program. As such, the state of Louisiana has established program guidelines pertaining to eligibility, administration, award amounts, and implementation. Proposed legislation in the 110 th Congress such as S. 1541, S. 1897, and H.R provided the basis for discussion regarding federal preemptions of state authority for staterun programs such as the Road Home. The primary focus of federal attention appeared to be on program elements that arguably discriminated against applicants based on age or the choice of whether to remain a homeowner and occupant in Louisiana. Redundancy of Disaster Inspections Members of Congress, like residents and others, may be concerned with the redundancy and inefficiency of home inspections. A single home may be inspected as many as five times by different entities, including FEMA, SBA, private insurers, Road Home officials, and lenders, all of whom express the need to assess the same damage. 40 The duplication of inspections creates delays in the provision of disaster assistance and places a burden on homeowners. Congress may wish to consider waiving inspection requirements in instances where such information has already been attained by a federal agency. Standardizing Cost Projection Methodologies HAP has shown that it is difficult to project program costs in areas of large-scale disasters. When the initial projections fall substantially short of the program needs, additional legislative action may be required. In order to ensure program efficiency and to expedite funding, there arguably is a need to standardize a methodology for projecting funding for disaster-related housing programs. Congress may wish to consider standardizing the methodology used to establish disaster assistance program costs across all federal agencies involved in disaster recovery. Cost and Availability of Hazard Insurance HAP requires that homeowners receiving federal assistance maintain insurance coverage. This requirement is considered by some homeowners to be burdensome due to high premium costs and limited availability of new hazard policies. Congress may wish to consider legislation related to insurance coverage when assessing housing-related disaster assistance. 41 Concluding Observations Analysis of the Louisiana Road Home program provides an opportunity to assess the challenges and policy questions raised by federal aid for state disaster housing assistance programs. Because of the devastation of Hurricanes Katrina, Rita, and Wilma, the Road Home program received an unprecedented level of federal disaster assistance. The scale of the Road Home program has created unique challenges including accurately predicting eligible applicants and average award 40 Ibid. 41 For additional information on hazard insurance, see CRS Report R40650, National Flood Insurance Program: Background, Challenges, and Financial Status, by Rawle O. King. Congressional Research Service 12
16 amounts in order to project program costs. Fluctuating program cost projections resulted in the need to seek additional federal funding and congressional intervention. Program funding issues became a catalyst for other policy questions. For example, the use of HMGP funds for the Road Home program stirred discussions regarding waiving FEMA regulations and changing program eligibility requirements. Fluctuating program cost projections raised questions of federal agency information sharing. Discussion of issues related to federal aid for state disaster housing assistance programs have raised broader policy questions. These questions may include the following: Does Congress need to clarify the role of federal agencies in federal disaster assistance? Should there be a standardized methodology for projecting disaster impacts and program costs? What is the role of the federal government in state-implemented disaster assistance programs? Author Contact Information Natalie Keegan Analyst in American Federalism and Emergency Management Policy nkeegan@crs.loc.gov, Congressional Research Service 13
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